FORISK Wood Fiber Review: Delivered Fiber Prices, the Logging Industry and $15 Minimum Wage

The supply chain impacts of a minimum wage increase to $15 an hour vary by region.
By Andrew Copley and Shawn Baker | April 26, 2021

In forestry, the iron goes to the resource—firms build mills near trees. But what kinds of mills get built and when? This depends on consumer demand and the health of the economy. For mills to manufacture the building, paper and bioenergy products demanded by consumers, a functioning wood supply chain is needed—a steady, localized harvest and delivery of logs. This link in the supply chain relies on tens of thousands of hardworking loggers and truck drivers around the country. Recent proposals suggested raising the $7.25 federal minimum wage, which has not been changed since 2009, to $15 an hour. The impacts of such an increase on the supply chain and, ultimately, fiber prices vary by region.

Nationally, the median hourly wage of logging business employees was $20.46 in 2019. While logging jobs are often associated with the men and women harvesting the trees and delivering them to mills, there are many other critical support jobs in the industry. It is these jobs that are among the lowest paid (Figure 1). Of the 10,000 jobs in logging businesses earning less than $15 per hour, roughly 7,000 are in-woods workers (equipment operators, timber fallers, etc.) or truck drivers. The remaining 3,000 are in other roles. Nearly half of the administrative and office support jobs in logging earn less than $15 per hour. Around 20% of the repair and maintenance staff, as well as road-building crews, are also under the threshold.

Geographically, the effects of a federal minimum wage hike are not uniform. In the Pacific Northwest, far fewer employees earn under $15 per hour than in Appalachia or the South. The average payroll increase for a western logging business would be $1,200 per year while an average Appalachian logging business would add nearly $10,000 per year (Figure 2). Again, these costs would not be felt uniformly within a region. Larger, well-capitalized businesses with higher average pay rates would have few increases, while smaller businesses would likely need to raise pay for a greater proportion of their staff.

While it is difficult to determine how the logging industry might react to the wage hike, the last recession showed woods workers and truck drivers were least likely to lose their roles during financial crises. Loggers are more likely to fund higher wages by either cutting support jobs or raising their contracted rates. If the industry was to shoulder higher costs without cutting any staff, an unlikely outcome given the scale of the change, the total industry payroll would increase around $48 million, or roughly 10 cents per ton for every ton harvested in 2019. The average hourly wage for the entire industry would increase 50 cents per hour.

At least 50% of the costs of a delivered softwood pulplog are from logging and hauling. While prices have been trending lower across the U.S. (Figure 3), a wage shift of this magnitude will impact prices, varying by exposure. In seven states—Alabama, North Carolina, Michigan, Pennsylvania, South Carolina, Tennessee and West Virginia—over one-quarter of the logging industry earns less than $15 per hour. While all these states are in the eastern U.S., they are dispersed across the Lake States, Mid-Atlantic, Appalachian, and southern regions of the country, highlighting the geographic extent of the industry and impact. The Pacific Northwest, which experienced the largest decline in delivered softwood pulplog pricing in the first quarter of 2021, down 24% year-over-year, is the least exposed. Increasing the minimum wage will increase the cost to harvest and deliver logs, and may reduce logging capacity. The impact will be felt across the wood supply chain and could result in increased delivered puplog prices for mills, lower stumpage prices for landowners, reduce logger’s profit margin—which is already razor thin—or some combination of the three.

Authors: Shawn Baker, Andrew Copley
Forisk Consulting LLC
[email protected]

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